ECB bond-buying reports send euro lower

October 22, 2014 | 10:26

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Reports that the European Central Bank could expand its bond-buying programme to corporate debt pushed the euro lower against the dollar and other major currencies on Tuesday (Oct 21).

A display of €50 notes. (Photo: AFP/Philippe Huguen)

NEW YORK: Reports that the European Central Bank could expand its bond-buying programme to corporate debt pushed the euro lower against the dollar and other major currencies on Tuesday (Oct 21).

The idea, reportedly under discussion at the ECB but not yet decided on, comes as the central bank struggles to combat deflation pressures and shore up growth in the 18-nation eurozone. If followed through early next year as some reports suggest, the move could further push down long-term interest rates in the euro area and further encourage bank lending.

Currently the ECB's quantitative easing programme is limited to covered bonds and asset-backed securities, but the corporate paper market is much larger and well-established.

Christopher Vecchio, currency analyst at DailyFX, said there was an impetus behind the euro's fall from the German finance minister's remarks that a weak euro is good for German exports. "The ECB corporate bond buying rumor is one thing, but outright acknowledgement from a German official that a weaker euro is welcomed is a downright shock," he said.

The dollar was also supported by a rebound in existing-home sales in the United States in September, suggesting falling mortgage rates may be pushing buyers back into the market.

AFP

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